Page 331 - DMGT501_OPERATIONS_MANAGEMENT

Unit 14: Purchasing

Notes
How does centralizing purchasing affect hotel buyers?
"For the better," Salsbury reports. "Instead of spending most of their time on the phone or
seeing sales reps and shopping for price, they are freed to manage their inventories better.
They are able to concentrate on optimizing deliveries.

"Under the old system, they had to constantly search for the best value at the best price.
That takes up a lot of time that is now spent in managing the purchasing function.
"The value under our central program is controlled by the specifications. We have
established those standards in conjunction with the people out there in the properties. By
using a single distributor and auditing our results, we're assured we're getting what we
specify.
"The hotel buyer can be sure that he or she is getting the best value obtainable, because we
have a combined leverage that never existed at the single-property level."
Salsbury insists that just getting a lower price isn't the objective. "It's a secondary benefit,"
he says. "Our main objective is to make the purchasing function more quality efficient. We
want to take the guesswork out of buying foods and other supplies.
"For example, there may be three different olives with the same counts on the label. Yet,
when you cut those products, you find that the yields may be widely different. You often
find that the most olives that are the most costly by the unit are really the most economical
when you relate them to yield."
And, says Salsbury, "the savings also represent the allowances related to distribution
efficiencies. That's all new money, since there was no system in place to get these efficiencies
before we installed the program."
Is the program proceeding according to schedule?
"In fact," Salsbury says, "it's ahead of schedule. We've been able to put it in place faster that
we had forecast because of the wholehearted cooperation we'e gotten from the local level.
One of the keys to the whole thing is keeping it invisible to the people we're really
serving: the chefs and food and beverage managers. They can call for their orders just as
they did before, but now it works with more efficiency at lower cost.

"We're making sure that we put each region on line and work all the bugs out before we
tackle the next one. We not only make sure the program is working; John [McDonald]
tracks it to see that it is doing what we intended. By this time next year, we should have all
of our properties under the program and taking advantage of the effeciencies and savings."
Questions

1. What are Salsbury's thoughts on centralized purchasing?
2. What benefits does the company want to avail by centralized purchasing?

Source: http://findarticles.com/p/articles/mi_m3190/is_n45_v24/ai_9116104/?tag=content;col1

14.6 Summary

Purchasing is responsible for obtaining the materials, parts and supplies and services
needed to produce a product or provide a service. Purchases represent about 55 percent of
the cost of the finished product.

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